Minifundios, or small subsistence or near subsistence farms, normally
absorb the majority of rural people in the developing countries of Latin
America and elsewhere in the world. Although a great deal has been written
about subsistence farms, and their inclusion in the development process is
frequently considered, schemes to improve the individual economic situation
of these farmers are mostly failures. Reasons for failure include various
combinations of large numbers, isolation, low educational levels, lack of
private resources, insufficient public resources, poorly planned or co-
ordinated programs, and lack of information regarding economic constraints
and requirements and optimum input and product combinations for feasible
solutions to problems of the minifundistas.

Schultz's "Economic Efficiency Hypothesis" proposes that farmers in
traditional, but stable agriculture have adjusted to their conditions in
such a manner as to be economically efficient. We agree with this
hypothesis which implies that no changes in input or product mix from among
the alternatives historically available will result in any significant
improvement in the income to the farm.

But more and more, traditional farms are being affected by new tech-
nologies. Even though many efforts are made to supply "packages" of
improved techniques, it is virtually impossible to transform the traditional
subsistence farm into a '"micro commercial farm" with any sort of input
package. The reason is that no such package can include all the required
modernizing factors in the proportions in which they are required.

It is logical to argue, as Schultz has done (p. 162 ff.), that the
introduction of a modern technique is not always profitable in any particular
area because it may not be adapted, the price conditions may not be similar,
risk may be increased, etc. Again, we do not disagree with these considera-
tions. But we would argue that a more important effect is that the introduc-
tion of one or more new factors in an otherwise stable and traditional farm
economy adversely influences the economic balance of the traditional factors
which are not being changed.

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The introduction of a new variety, a high analysis fertilizer, or a
potent insecticide singly, or in a package, can have such unforeseen effects
as shifting labor from Stage II of production to Stage I and land from
Stage II to Stage III. These shifts are so unexpected that they are seldom
if ever considered when attempting to analyze the reasons for the poor
performance of otherwise well planned development programs.

A study was conducted in a minifundio area of southern Colombia,
near Pasto in the Department of Narifio, which sheds some light on the
nature of the problem and should be of wide interest to economists and
other agriculturalists working in small farm development. In the study
area traditional agriculture remains the predominant characteristic, but
through the efforts of rigorous research, extension and credit programs,
many new technologies are finding their way into common use. Nevertheless,
farm incomes remain low. The study which is presented in this paper
discovered some of the reasons -- the unforeseen consequences -- that new
technologies are not having the predicted effect on farm income.

Number of Enterprises and Farm Size

Apart from the usual classification of farms based on size, it was
possible in the study to separate them into specialized and diversified
farms. This was done in order to analyze one hypothesis: On small farms
with few resources, diversification tends to force some resources into
Stage I of production (and at the same time force others into Stage III).
The implication is that any combination of enterprises would result in a
lower income than specialization in only one crop at a time (owing to the
concave nature of the "Opportunities Curve").

Of the 108 farms (of from 1 to 20 hectares) surveyed, it was found
that from among those from 1 to 5 hectares in size, two-thirds were
specialized and one-third were diversified. For the farms from 5.1 to
20 hectares the proportion was reversed. This was evidence, though not
conclusive, that the farmers themselves were finding our hypothesis to be
true -- on the small farms, specialization tended to yield more income.
The net income figures, both per hectare and per farm, corroborated this
evidence. The dividing size was 10 hectares. The average net income
per hectare and per farm was greater for specialized farms of 1 to 3,
3 to 5, and 5 to 10 hectares than for diversified farms. But net income
was greater for diversified than for specialized farms in the 10 to 15
and 15 to 20 hectare size groups.

The smaller (1 to 10 hectares) specialized farms yielded more net
income than the smaller diversified farms even though the diversified
farms used more traditional (labor and seed) as well as modern (fertilizer
and pesticide) inputs per hectare than the specialized farms. Considering
the use of modern inputs as an indicator, the small diversified farms
would be rated higher than the small specialized farms -- yet their
performance on a net income basis was poorer. For farms larger than 10
hectares, the greater use of traditional and modern inputs on the
diversified farms did produce more net income than on the larger specialized
farms.

L

Factor Productivity and Stages of Production

In order to determine more precisely what the effects on factor
productivity were, the area was studied on a crop by crop basis.
Unfortunately, the survey was too small to allow the determination of
factor productivity crop by crop for the specialized-diversified strata.
Only the farm size classification could be used and this only for wheat,
the most widely produced crop in the region.

Contrary to what one would expect, the smaller farms were not using
sufficient labor in the production of wheat. Additional analysis
revealed that the amount used during the growing of the crop was
approximately correct, but the amount used during land preparation
(which is closely tied to animal power) should be more than doubled.
Although we found no indication that the average amount of labor used
for land preparation fell in Stage I, it certainly must have been close
to the edge of Stage II.

The significant aspect of the insufficient use of labor in land
preparation is that the farmers spend months in preparing land for
seeding, and generally plow and harrow (with animals) three times each.
(Plowing usually begins in October or November and seeding is in
February and March.) Such a pattern probably was the most efficient,
given the resources available before the introduction of new varieties,
the fertilizers and pesticides. But these modern technologies have
all been developed in association with adequate mechanized land preparation.
Hence, the formerly adequate land preparation techniques now become
inadequate when combined with a partial "package" of modern technology.

Apparently the productivity of the modern technology is also
difficult to predict when transferred to a traditional agricultural
setting. On small farms in the study area and for wheat, the quantity
of seed and fertilizer used was insufficient to reach Stage II and
pesticides were used in excess, the average quantity producing negative
marginal productivities. On the larger farms, seed and fertilizer use
was in Stage II but pesticide use still was excessive. An informed
explanation of the underuse of seed on the small farms (even though
the average use corresponded to current recommendations) was that the
seed used by these farmers was not of the quality used for experiments
or demonstrations or even by the larger farmers. Hence, the same quantity
yielded less plants per hectare than anticipated in the recommendations.
Although its use on the larger farms reached Stage II, the quantity of
fertilizer used was very inadequate on both the small and large holdings.
Attempts to separate pesticides were not entirely adequate but indications
are that insecticides were used excessively while the small use of
herbicides could be increased.

Area seeded was another factor of interest in the study. The
results indicate that for wheat, the average area seeded on small farms
(2.36 hectares) is less than the optimum size, but the 7.91 hectare
average on the larger farms is too large. The implications of this effect
are discussed in the conclusions.

In partial summary, it is evident that a reshuffling of the
proportions of the modern and traditional.factors in use on these farms
could increase income substantially. An increase in fertilizer and seed
use accompanied by more labor in land preparation could increase production
of wheat per hectare by 50 percent and the additional costs would have a
100 percent net return.

But an overriding problem with this solution is that it is doubtful
that land preparation can be markedly improved by intensifying current
traditional practices. As a minimum, improved yokes for the bullocks
and better implements for animal traction will have to be introduced to
the area in order to achieve a more efficient balance with the other
modern techniques now being used. Possibly only mechanized land preparation
will suffice.

In the Department of Narifio potatoes are an important commercial
crop, but in the study area A(unicipic of Yacuanquer) they rate much more
as a subsistence crop (wheat is the main commercial crop). Nevertheless,
potato production is high risk and requires more technology than wheat.

Labor used in land preparation was found to be adequate for potatoes
but an increase in labor would be desirable during the growth of the crop.
Relatively large quantities of fertilizer were used (from about U.S.
$ 20.00 to $ 125.00 per hectare with an average of $ 65.00) but an increase
would be profitable. Pesticide use, while very common, was found to be
quite inadequate as average insecticide use did not reach Stage II.

Corn, another subsistence crop in the area, is considered inferior
to potatoes and grown usually in small plots. In accordance with its
stature in importance, it receives relatively poor care and few modern
inputs. Indeed, our study indicated that labor, seed, fertilizer and
pesticides were all used in quantities too small to reach Stage II of
production. Under the circumstances the farmers would certainly have been
better off not raising corn except that they did so as a form of insurance
for home consumption.

Conclusions

This study, which was undertaken in a traditional agricultural
area being subjected to modern technologies through rigorous research,
extension and credit programs, demonstrates that serious maladjustments
have been created in resource combinations such that some factors of
production are in Stage I and others are in Stage III. It is very likely
that this maladjustment affects all traditional economies which are
subjected to incomplete "packages" of modern or new techniques. But it
is also very likely that it is not feasible to supply complete packages
because too many factors would have to be included. One extremely
important factor which is virtually impossible to include in a package
(except on a very small scale) is the management capability of the small
farmer.

The conclusion that must be reached is that maladjustments will always
exist so long as traditional (or even non-traditional but poorly developed)
agriculture is subjected to the development process.

The same conclusion holds, of course, for any economy which is not
static. The difference is that in a more developed economy the changes
are expected, can be predicted, and are relatively short-run -- adjustment
begins as soon as the maladjustment is felt. In a traditional economy,
people may well be better off than before even if their resource
combination is inefficient so there is no feeling of being out of adjustment.
Further, a traditional agricultural economy is seldom studied in this
light; so, rarely is it determined that the factors of production are
inefficiently allocated. In fact, there has never been any real
development of a "Theory of Subsistence Economics" to serve as a basis
for such studies.

It can also be concluded that there is a tendency toward lesser
incomes on small farms which are diversified than on those which are
specialized. We were unable to demonstrate in the study that this was
due to a concave opportunities curve resulting from combining enterprises
in Stage I of production. However, there is substantial evidence that
this is indeed what happens because many factors, even on specialized farms,
were shown to be in Stage I in this traditional economy which is being
subjected to the modernizing process.

To be specialized does not mean that a farm can produce only one
crop a year such as wheat in our study area. Nor does it mean only one
crop each semester (either the same or a different crop). A few different,
but similar vegetables, for instance, could probably be raised by one
farmer "specialized" in vegetables without his being affected by
uneconomic enterprise combinations. But to combine the vegetables
with corn or wheat or even potatoes probably would mean to feel the effect
of the concave opportunities curve.

Another conclusion of the study is that specialization of small farms
can tend to reduce the pressure for expanding farm size in areas where
population is high and land scarce. It is easier to reach the optimum
area planted for one crop on a small farm than for each of two or more
crops. Thus, specialization can be an important component of an agrarian
reform program.

Recommendations

One of our recommendations deals with action programs and the other
deals with research as a source of information for the action program.

Any action program oriented toward the development of small,
traditional farms in any particular area, must consider the desirability
of developing specialized farms rather than diversified farms. Even
though specialized farming bears a higher risk to the producer, small
farmers in our study area tended toward it. But it must be recognized
that the risk factor is extremely important. When a farmer puts all
his resources into the production of one crop he must be assured that a
reasonable market exists for his product and that he can purchase his

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other necessities at reasonable prices when he needs them. This requires
a well developed infrastructure (which was the case in our study area)
and a degree of confidence in the stability of the economic system, at
least in the short run. Without these assurances, it will be difficult
to convince a traditionally self-sufficient farmer to specialize in the
production of a single crop to increase his real income.

Accompanying any successful development program must be a carefully
planned and critical research program. Besides the normal research into
varieties, pesticides, fertilizers, crop combinations and other practices,
the complete research program must include continuing studies of the
nature of this study to ascertain the current status of the development
process and help guide the rational introduction of new technologies
into traditional agriculture.